Credit scores can be confusing, hard to understand and even scary at times (and not just for your teens). But, knowing what a credit score is, how to use credit responsibly, and reaching or maintaining a good credit score number is important. So, where and how do you even begin to teach your teens about it?
We’ve teamed up with Borrowell to find the best 5 tips for teaching your teens the basics of credit and credit scores to start them off on the right financial track – plus a few tips for you too.
This is at the heart of financial literacy (and a good credit score) and there are plenty of ways you can do this without sitting down to a boring lecture. Here are a few starting ideas:
- Turn game night into a learning opportunity by playing financially-focused games like Monopoly or the Game of Life and integrate lessons into the game play.
- Let them earn money using chores or a part-time job if it’s reasonable. Encourage them to save up for the new game console that they’ve been eyeing up instead of just buying it for them.
- Take them to open up their own bank account with both a chequing and a savings! Bonus points if you have them attach a goal to that savings account.
- Set a good example with your own spending and explain to them the rewards of good financial decisions… like being able to take family vacations, send them to summer camp or smaller luxuries like ordering take-out.
Did you know? Carrying small balances that you’re able to pay off every month demonstrates your financial responsibility and in turn, can boost your credit score.
Here’s the basics: your credit score is a metric used to assess credit-worthiness and represents your overall financial health. It ranges between 300 and 900, the higher your score, the better. Having a good credit score is important because you’re more likely to be approved for credit and receive lower rates for financial products. But, before you sit down with your teen, we recommend brushing up on a little more detail with
Did you know? Maintaining a good credit score might also impact your home insurance rate. Having a score of 700 or higher (the average credit score in Canada is 7491) can save you anywhere from 35-60% on your premium!
Get your teen to save up for a deposit and
Did you know? 30% of your credit score depends on credit utilization (the balance of debt you’re carrying compared to credit you have available to you). Equifax recommends that you keep your credit utilization below 75% to avoid setting off any red flags with lenders. Learn more from Borrowell about
If you’ve followed steps 1 through 3 your kid should be off to a great start and with a little credit history of their own. Now is the time to show them how to check their credit score and report. Walk them through what’s included (personal info, accounts, inquiries) and explain what to look for (discrepancies, negative impact, etc.). Since their report could be pretty basic, showing them your personal credit report and explaining how past behaviors have had a positive or negative impact could be a great learning opportunity.
Did you know? According to a
It’s never too early to explain to your kids the importance of guarding their personal and financial information to avoid fraud or identity theft. Remember to never give out personal details to those who ask without confirming why the information is used, how it’s stored and verifying who they are.
Did you know? Most home, condo and tenant insurance policies cover you and anyone else on your policy for
Have a great credit score? Start saving on your home insurance with Sonnet.
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